5 strategic sourcing approaches that will transform how we do business

To accommodate for new market needs and increasing hypercompetition, the way business partners interact will change over the coming decade. 

Just as outsourcing is growing more complex in order to cover a larger variety of needs, we can expect that relationships between sourcings firms and outsourcing providers will do the same. Increasingly, we will witness an environment where the boundaries between insourcing and outsourcing will become obsolete, ever-changing and for the sake of many - also interdependent.

According to our global study, there are five strategic sourcing approaches in particular that will lead this relationship transformation.

strategic sourcing

Crowdsourcing

Crowdsourcing can be explained as a process in which an organization chooses to outsource tasks that traditionally were performed internally to a crowd of individuals external to the organisation. By turning to the capabilities of external individuals, companies overcome their own limitations of knowledge or experience and take advantage of collective learning and labor capacity in a given location.

strategic sourcing

Compared to outsourcing relationships that normally are tied to strict contracts, crowdsourcing is more likely to be compared to a plug and play service where activities are completed on demand. This also means that crowdsourcing often combines numerous self-identified volunteers or part-time contract workers, where each contributor acts on own initiative.

strategic sourcing

Solution-sourcing

To the extend where a company is looking for solutions for more technical and complex activities, solution sourcing is a great alternative to crowdsourcing. The solution sourcing approach describes a process where a number of external and independent service providers solicit a solution for a client organisation.

strategic sourcing

Solution sourcing has the ability to assist organisations in tapping into the best ideas and resources for addressing increasingly complex business challenges by giving access to a breadth of experience of service providers.
Therefore, this strategic sourcing approach is also mostly used when client organizations specifically are looking to explore a solution for which the answer yet is unknown. The challenge with this, however, is the following: How can companies set up measures for solutions that have not been pursued before? More risks associated with solution sourcing are outlined in the illustration below.

strategic sourcing

Network sourcing

Network sourcing is gaining more and more prominence towards 2020 and is focused upon three types of interaction:

  • Purchasing networks: consist of two or more organizations that come together for the purpose of more advantageous pricing than what could be obtained if each organization purchased the service alone.
  • Service provider networks: give members the ability to tap into a community of industry professionals and experts that can help solve any business-related challenges the members may be facing.
  • Network to network: interactions occur when the two consortiums described above engage in the purchase and provision of services.

strategic sourcing

This form of collaboration allows for each part to access more expertise and resources than what would have been possible independently. As network sourcing does not require businesses to invest in and develop certain skills and capabilities internally, it automatically provides the network members with flexibility and organizational agility.

Despite this, not even network sourcing comes without risks as visualized below.

strategic sourcing

Co-sourcing

Co-sourcing characterizes a long term, one-to-one business relationship where both parties have mutually vested interest in the collaboration’s outcome. In practice, co-sourcing refers to a partnership in which the asset manager and the service provider create workgroups and processes providing customized support across various business functions. This is delivered over at least a three to five year timespan. Using this approach, the parties form an interdependent relationship, where a substantial level of operational and managerial integration takes place.

strategic sourcing

When pursuing a collaborative arrangement with flexibility, the goal should be to create competitive advantage through the relationship. Ultimately, co-sourcing allows for both parties to receive greater value (financial or otherwise) and retain less risk, as outlined in the graphic below.

strategic sourcing

Mesh sourcing

This approach refers to a hyper-specialized integrated business environment connected by mutual interest in things like profit, values and social change. Thereby the term represents a highly collaborative, networked ecosystem approach to outsourcing and service provision.

Business interests and operations are meshed across several organizations to the extent that there is no longer a distinction between outsourcing and standard business practice.

strategic sourcing

As visualised in the graphic above, a meshed network is not a one-one-one relationship. Rather it should be understood as a complex system of interdependent parties with a vested interest in the success and profitability of one another.

Mesh sourcing should be understood as an emergent sourcing approach which complements organizations that are looking for new and innovative ways to integrate in order to yield the greatest value and most sustainable returns.

Hence, it is a matter of creating interdependencies and interconnectedness between industries and markets to become more innovative, efficient and sustainable.

strategic sourcing

 

For more insights on strategic sourcing, download our 2020 Vision White Book: Future of Outsourcing!

Related articles